Correlation Between Lancashire Holdings and Assured Guaranty
Can any of the company-specific risk be diversified away by investing in both Lancashire Holdings and Assured Guaranty at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Lancashire Holdings and Assured Guaranty into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lancashire Holdings Limited and Assured Guaranty, you can compare the effects of market volatilities on Lancashire Holdings and Assured Guaranty and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Lancashire Holdings with a short position of Assured Guaranty. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lancashire Holdings and Assured Guaranty.
Diversification Opportunities for Lancashire Holdings and Assured Guaranty
0.23 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Lancashire and Assured is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Lancashire Holdings Limited and Assured Guaranty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Assured Guaranty and Lancashire Holdings is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Lancashire Holdings Limited are associated (or correlated) with Assured Guaranty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Assured Guaranty has no effect on the direction of Lancashire Holdings i.e., Lancashire Holdings and Assured Guaranty go up and down completely randomly.
Pair Corralation between Lancashire Holdings and Assured Guaranty
Assuming the 90 days horizon Lancashire Holdings is expected to generate 1.69 times less return on investment than Assured Guaranty. But when comparing it to its historical volatility, Lancashire Holdings Limited is 1.25 times less risky than Assured Guaranty. It trades about 0.08 of its potential returns per unit of risk. Assured Guaranty is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 7,224 in Assured Guaranty on September 14, 2024 and sell it today you would earn a total of 1,426 from holding Assured Guaranty or generate 19.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 98.46% |
| Values | Daily Returns |
Lancashire Holdings Limited vs. Assured Guaranty
Performance |
| Timeline |
| Lancashire Holdings |
| Assured Guaranty |
Lancashire Holdings and Assured Guaranty Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lancashire Holdings and Assured Guaranty
The main advantage of trading using opposite Lancashire Holdings and Assured Guaranty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lancashire Holdings position performs unexpectedly, Assured Guaranty can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Assured Guaranty will offset losses from the drop in Assured Guaranty's long position.| Lancashire Holdings vs. Playa Hotels Resorts | Lancashire Holdings vs. MIRAMAR HOTEL INV | Lancashire Holdings vs. ADRIATIC METALS LS 013355 | Lancashire Holdings vs. INTERCONT HOTELS |
| Assured Guaranty vs. First American Financial | Assured Guaranty vs. MGIC Investment | Assured Guaranty vs. Lancashire Holdings Limited | Assured Guaranty vs. Trisura Group |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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